In May 2005, when Lenovo Group completed a $1.75 billion purchase of IBM’s personal computing division, the China-based manufacturer leapfrogged its way to become the No. 3 computer maker in the world, second only to Dell and Hewlett-Packard. Along with rights to the venerable IBM name and logo, Lenovo got Deepak Advani, a Wharton graduate who was serving as vice president of marketing for the old regime. Michael Useem, director of Wharton’s Center for Leadership and Change Management, and Wharton marketing professor John Zhang spoke with Advani – who is now Lenovo’s senior vice president and chief marketing officer – about what it takes to merge an Eastern business with a Western one.
Useem: Following Lenovo’s acquisition of the IBM PC line, could you talk about the kind of leadership you need to exercise under the new Chinese ownership?
Advani: When you look at the IBM PC division, remember that the “I” stands for international. The last three jobs I had were all worldwide in scope, so the ability to work with individuals from different cultural backgrounds was really a requirement of IBM. In the leadership positions I held there, my teams were located around the world – in Latin America, Asia, Europe and in the United States.
One of the key leadership attributes necessary to do well at IBM was to find ways to turn diversity into a competitive advantage. That happens when you are very respectful of different individuals and the way they think, because at the end of the day everyone has developed a point of view that has been influenced by the various experiences they have had and the cultures within which they operate…. Very often there isn’t a black-or-white, right-or-wrong answer. If you can put aside your biases and look at others … from an objective perspective, then all of a sudden you start to realize that what they are saying makes so much sense to them.
Also, there are cultural differences. Some cultures are much more vocal, aggressive and outgoing, and others are more reserved. Keeping that at the forefront of your consciousness often helps, since very often you have to draw ideas out of certain people. So at the end of the day at IBM, one of the things I [learned] was to be respectful and to understand different people’s points of view.
[With respect to the Lenovo transaction], one of the most fulfilling experiences with the team that I have worked with over the course of the last six months has involved getting to know some of my colleagues. They are very smart, very young, very driven and very good team players. The working relationships have been outstanding on both sides. There’s a burning desire to make this succeed.
I remember in your [Useem’s] leadership class that you would say, in the context of Apollo 13: “Failure is not an option.” We are in the sort of situation where we are energized to make this thing work. As [Lenovo] chairman Yuanqing Yang told us six months ago, in order to be a cohesive team we had to remember three key things: trust, respect and compromise. We would need to trust one another, to be respectful of the different points of view, and to compromise – not in the sense of the lowest common denominator, but in the sense of realizing that not everything we do will be done the way we want, or the way we always did it. We are going to look at the best of all worlds and try not to do what we have always done in the past. That is the meaning of compromise, and it has worked very well for us.
Useem: A reporter once asked Dale Berra, son of [baseball great] Yogi Berra, if he was similar to his father. And he replied, “No, our similarities are different.” Given that you have worked on both sides of the Pacific, what are some significant leadership styles or approaches that are similar or different from those of the U.S., and how do you use them to bridge an international gap?
Advani: We are similar in that both sides are very much meritocracies, so the best ideas rise to the top. I have also seen a very strong focus on the marketplace and what the customer really needs. Both the old Lenovo and the old IBM PC division differentiated themselves in the marketplace through innovation, but the mantra that we both have is a focus on innovation that matters. We don’t want to innovate for the sake of innovation, but we want to innovate in areas that address customer pain points.
So being very focused on the marketplace and on customers are key attributes. And we are both focused on honesty and integrity in all our dealings. Maybe it’s unique to this company, but Lenovo modeled itself, 20 years ago, after some of the multinationals like HP and IBM. When two companies come together, there tend to be unique cultural differences to be resolved. A lot of people focus on the differences in China and the United States and the rest of the world, but I think that is less important, because IBM operates in so many countries that we are used to dealing with global differences.
What’s more important are the company cultures and how they are different. As we have seen, some mergers and acquisitions never realized their full potential because the company cultures were so different. But in this case we actually studied the key values both companies had, and they mapped almost one-on-one. Innovation is the way we both differentiate, and customer service is very important, [as are] integrity and honesty in all dealings. I would say from a leadership perspective, having those attributes in common – meritocracy, focus on the customer, and integrity in all our dealings – is important.
You also asked about the differences between the way we did things in IBM and the way I see Lenovo. When I was in the PC division of IBM, during the last four years we were not investing in the business for growth. We got out of the consumer [business] in the late 1990s. We decided that profitability was very important and instead focused on the enterprise market. So there wasn’t as much focus on growing the business. Whereas in Lenovo, I sense an incredible optimism and appetite for growth. The mindset is that “the future’s so bright I’ve gotta wear shades.” As we bring two teams together, creating a culture of profitable growth is one of the important issues. So we were a little different there.
The other difference is that in IBM we were a business unit within a very large, complex organization. If there was a problem that needed to be solved, we needed to make sure that we were consistent with Armonk (N.Y.) corporate headquarters’ policies, systems and other issues. But what’s incredible about Lenovo is because it’s a PC-focused company – in a very dynamic, fast-moving industry – if it thinks that something needs to get done it can do it. As we come together, that’s very liberating, at least for me personally. If you see an issue, you just take action, you take it quickly and you learn as you go.
Zhang: Do you have a free hand?
Advani: Absolutely. One of the first questions I asked chairman Yuanqing was: When it comes to decisions that I need to make – especially in marketing – do I need to go to him for approval? He said: “You are the head of marketing. You make the decisions and I will support them.” He was very clear on that. So one of the things that I have noticed, and I don’t know if you can generalize this as “East vs. West,” is that in very large companies you tend to be a little more risk-averse. You tend to be more conservative because you don’t want to make a lot of mistakes. That damages your career to some degree. Lenovo is much more entrepreneurial. If something needs to get done we say, “Look, let’s do it and let’s go.” There’s a sense of urgency. That’s a different leadership style and I think it’s really great for the PC industry.
Zhang: My mom used to tell me that any marriage is difficult, but a cross cultural marriage will be even harder. Right now you are in a honeymoon period. I wonder if you have encountered any sort of surprises.
Advani: Yes, there have been some little surprises. But they are more silly than serious. Here’s an example: I’ve gone to China maybe half a dozen times this year. My colleagues there are just incredibly gracious hosts. Someone picks you up at the airport; the calendar is planned out; it’s terrific. Well, we sort of made a mistake early on, when an executive [from China] visited the United States. We didn’t realize that maybe someone should go pick him up at the airport and have things laid out. It was a courtesy kind of call that we were not conscious of, and we had to fix it. But it was a very minor thing.
As you get to know some of your colleagues, you find that companies have very similar cultures. We have been able to work through most issues very well because it comes down to people. It comes down to one-on-one relationships, and once you start building those relationships, then you can overcome many things. That’s what has been happening. Whenever we get together we go out and have dinner, show pictures of the family and all of a sudden there is a real bonding taking place. In February, for instance, we had a meeting of about 30 executives in Las Vegas. We were still getting to know one another, and the chairman of the board put his arm around my shoulder and said, “Hey, Deepak, I hear you’re a pretty good blackjack player. Let’s try our luck at blackjack.” About eight of us took over a table and we were there for a couple of hours. We had a great time. We built very strong relationships.
Now, as we go forward, without a doubt there will be challenges. When you look at the way Lenovo operated in China, it was a very successful business model. On the China side we understand the business model; on the China side we understand the needs of the marketplace very, very well. A lot of it applies to other markets, particularly to other emerging markets. But not everything. So we’re having a dialog about what makes sense to replicate, and what doesn’t make sense to replicate. We will have those challenges, but the personal relationships that have been cemented will help us.
Zhang: Many Chinese companies seem to want to go international. Based on your interactions with the management there, do you think that those companies are ready to go international?
Advani: There’s no question that it’s going to happen. It’s just a matter of how quickly. I was with IBM for 13 years and my career was on the fast track, so I wasn’t looking to leave. But then this opportunity came along, and now, having had the pleasure of working with my colleagues in China for the last year or so, I have been incredibly impressed. The mindset here is very smart; they are great team players. And they really understand the basic business fundamentals. Many of them have been educated at business schools in the United States. The mindset is: What does it take to win, and how can we deliver value to customers? The management team is very hungry to learn what it takes to build a truly global business.
Useem: In light of your experience so far, do you have any advice or warnings for other Chinese companies looking to invest in the U.S.?
Advani: I think that if it makes business sense for the customer, then there’s a lot that can be gained from such partnerships. I did Linux strategy for IBM, and one of the comments that was made by a senior executive at IBM – back when Linux was very new – was that as companies we place bets on trends in the industry. Some pan out and some don’t. But if a trend is going to deliver economic benefits for customers, it’s going to happen with or without you. So you better find a way to make your business model work and get aligned with the market forces that will deliver economic benefits.
The advice I would have is that whether it’s a Chinese company working with an American company – or any two companies that are coming together – there have to be synergies and economic benefits to customers. Part of the reason that our integration has gone so incredibly well over the last couple of months is that there is hardly any overlap between the Lenovo business and the old IBM PC division. With the IBM PC division, more than 60% of our business was with notebooks. And when you look at Lenovo in China, 85% of it was in desktops. We [IBM] had revenue coming from every corner of the world, while [Lenovo] was focused primarily on China. We were focused a lot on the large-enterprise mid-market and they were focused on consumers and small business. As long as the business reason is sound, then coming together would make a lot of sense.
Zhang: What are the challenges that you face today, as the person in charge of marketing?
Advani: We are in the process of establishing the Lenovo brand and trying to introduce Lenovo to the world. There are competitors out there saying that every dollar spent on a ThinkPad goes directly to the Chinese government. So the challenge is establishing Lenovo as a worldwide brand that focuses on innovation in ways that matter to our customers and our stakeholders. You may know that Lenovo is an Olympic sponsor – of the winter Olympics in Italy and then the summer in Beijing in 2008. So we are leveraging the Olympics, the strong partnership we have with IBM, and the great products we will be introducing over the next couple of quarters. We are leveraging the strong relationships we have with our partners like Intel and Microsoft. We are going to use all these elements to introduce Lenovo in a holistic way to the world. It’s a huge challenge but it’s exciting.
It wasn’t too long ago that people thought Korean companies could not produce innovative, high-quality products, but Samsung and other companies changed that. And 20 years ago the same thing was thought about Japan. We’re at the beginning of a wave with China. When you look at Lenovo, a lot of people are completely underestimating the assets that we are going to bring to the market. We have won a number of awards [for our products] and I think the world is in for a surprise.
Knowledge@Wharton: Returning to the topic of complementary capabilities and synergies: Mary Ma, the CFO of Lenovo, was interviewed recently by BusinessWeek. She said that while Lenovo has very strong supply chain control, it doesn’t have much experience in sales and marketing, especially when it comes to managing in more than 160 countries, the way IBM does. How are you managing the process?
Advani: I’m responsible for managing the worldwide market for Lenovo. I have a global marketing team in Raleigh, N.C., and in New York. I also have marketing teams spread around the world. The European headquarters are in France, the Asia headquarters are in Australia and China, and I have localized marketing teams at the country level. These teams work to understand what the trends are in a given country, what the real met and unmet needs are of the target customer and what the best way is for us to communicate our value proposition.
Basically we’re taking that infrastructure and the marketing know-how we have around the world and using it to introduce the product that we sell only in China. So we have in-depth knowledge of countries all around the world. Our advertising agency, Ogilvy & Mather, also has local insights into the countries in which we operate. And even though the old Lenovo did not have a lot of international experience, we have very strong marketing teams in China. This whole process is designed to bring together the best of what the old IBM PC division has to offer – the international marketing branding know-how – and couple that with some of the strengths we have. There are many lessons we can apply from China and the other emerging markets, and that is going to be a big focal point.
Knowledge@Wharton: What role does the IBM image play in the Lenovo marketing? Is it helpful or a hindrance?
Advani: I think it’s absolutely helpful. IBM resells Lenovo PCs. It provides worldwide service and support for Lenovo PCs, and provides financing. IBM is the biggest customer because it buys Lenovo PCs. Most important, the IBM logo will stay on the ThinkPad and ThinkCenter PCs for up to five years. For 18 months it remains exactly as it is now. After that, the IBM part becomes smaller and Lenovo becomes bigger. Right now, we have talked to more than 4,000 of our customers and more than 90% of them say they are either positive or neutral with this deal. Neutral means that they love the story but they want to see the results. That IBM association is a very good bridge, because [these customers] get reassured…. In the near term, the IBM relationship and brand are key bridges as we establish Lenovo. As I build up the Lenovo brand globally, we will carefully watch [consumer] awareness, preference and other metrics to determine when the right time is to switch over from the IBM brand to Lenovo.